Early retirement reality check

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golow2016
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Early retirement reality check

Post by golow2016 »

I am hoping to get some feedback on my planned early retirement. Here are some specifics regarding my numbers:

Brokerage accounts

SEP 1.1 M
Roth IRAs: 480 K
Regular non-tax advantaged: 1.3 M
Checking/business accounts: 140K

Home: about 700k

No debt.

AA:

30% US total stock market and s/p 500 index
10% developed international etf
10% emerging market etf
10% reit etf
20% short term corporate bond etf
20% cash

I am planning on adding to bond allocation, but have been unable to pull the trigger given The low rate environment. I don't consider myself able to time the market, but still can't make myself buy long-term bonds at this point.
We are both in our early 50s.

My wife and I have been tracking our expenses over the past year and a half. We are averaging about 130,000/year. We have not factored in a new car, major home repair, etc. as we have not experienced those costs in the past couple years. I am an independent contractor, so we have been paying healthcare expenses and other benefits normally received by employees.

I am hoping to retire in about two years. My job currently brings in about 150,000/year after taxes.

When I plug my numbers into fire Calc, it gives me about 85% chance of not running out of money by age 90. If I include Social Security, approximately 32,000 per year at age 70, the number goes up to 92% or slightly higher.

I am assuming that my Social security benefits Will be worth less by the time I am 70, either by higher taxes, lower benefit calculations, etc. So I am not very comfortable using the Social Security benefits in my calculations.

Our plan is to shoot for 4% withdrawal rate, With the understanding that we may need to adjust in the future.

Any comments/feedback would be most appreciated. ...
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Watty
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Re: Early retirement reality check

Post by Watty »

golow2016 wrote:Any comments/feedback would be most appreciated. ...
I didn't try to crunch the numbers but with about three million in investments and a paid of house retiring in a few years sounds reasonable.
golow2016 wrote:I am planning on adding to bond allocation, but have been unable to pull the trigger given The low rate environment. I don't consider myself able to time the market, but still can't make myself buy long-term bonds at this point.
Then buy short term bonds or CD's. Having 60% in stocks like you do is similar to what the Vanguard 2020 fund has so that part looks good.

https://personal.vanguard.com/us/funds/ ... IntExt=INT
randomguy
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Re: Early retirement reality check

Post by randomguy »

Your portfolio is fine. Your in your 50s with 40+ years. Inflation is a much bigger risk than market volatility. We can debate things like REITs, corporate bonds versus treasuries, and so on but it really doesn't matter much. Get another .5% by buying the right CDs, bonds, and so on is nice but it isn't going to radically change the situation.

Look you have ~3million dollars in investable assets and a 700k house. You are right at the edge and a lot will depend on your flexibility with cutting spending. Would living on 100k/yr for 3 years ruin your retirement? Work another 2 years. Acceptable? Your success rate goes way up. Have another 500k of assets (and assuming you will be willing to downsize if needed), and your path is pretty clear. Right not it is border line. The good news is that the next 2 years will bring some clarity. Save 50k, make 300k in gains and your retirement picture will look a lot different than if your net worth is down to 2.5 million.
surfhb
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Re: Early retirement reality check

Post by surfhb »

golow2016 wrote:
When I plug my numbers into fire Calc, it gives me about 85% chance of not running out of money by age 90. If I include Social Security, approximately 32,000 per year at age 70, the number goes up to 92% or slightly higher.
With almost 4M dollars and there's a chance you may be broke in your later years? You have a spending problem my friend :happy

Reality check: Please break down where a couple in thier 50s with no debt spends 130Gs a year? Good God, man! You could have retired years ago if you kept your spending down
AlohaJoe
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Re: Early retirement reality check

Post by AlohaJoe »

If your expenses are $130,000 then you'll need to sell around $150,000 of your portfolio every year. That works out to 5% of your portfolio for the next 15 years. In the years where you need to buy a new car, do house repairs, or buy a new appliance it'll be more like 5.5% - 6.0%

That's certainly not impossible but it is on the aggressive side and most people here probably wouldn't be comfortable with that. Most people on this board would probably be targeting a portfolio of something like $5,000,000 before thinking about retirement with those expenses. Of course, take that with a grain of salt because bogleheads is a relatively conservative group, on average. If you asked the same question over at earlyretirementextreme you'd probably get a less conservative answer, on average.

Once you start taking Social Security, that drops down to 3.8%, which is a quite a bit better. The problem is the 15 years between now and then.

If you had clear ways to cut your expenses (selling a holiday house or boat, moving the kids from a private school to a public school, are some examples) if the market takes a turn for the worse or were mentally prepared to sell your house (or do a reverse mortgage or something like that) then it is probably workable.

There are things like Guyton's "Decision Rules", Pye's "Retrenchment Rule", and many others that offer guidelines to retirees on how to manage variable spending. You may want to look into some of them to understand how they work and how they might affect your ability to spend.

Three other quick comments:

- Remember that the "4% rule" is based on a 65-year old couple. You're over a decade younger, so it isn't really an appropriate measure.
- Using firesim to look at things out to age 90 is fairly aggressive. You have about a 70% chance of living longer than that, unless you and your wife are both smokers or have some other kind of chronic medical condition. Try running it again with ages like 95 and 100 to see how it looks.
- You also mention you're not planning on retiring for around 2 more years. A lot can change over that period: you can cut your expenses, you can save a lot more money, the market can do extremely well.
SpaceCowboy
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Re: Early retirement reality check

Post by SpaceCowboy »

surfhb wrote:Reality check: Please break down where a couple in thier 50s with no debt spends 130Gs a year? Good God, man! You could have retired years ago if you kept your spending down
Seriously! Why?
He has every right to spend his hard earned money any way he wants. Probably lives in a desireable HCOL. Insurance including health, home, auto, umbrella could be $25k alone at his level of wealth.
That said adopting a variable withdrawal strategy and having some flexibility on spending makes this a pretty doable retirement. Build a bridge for health insurance to Medicare age and income to SS at 70 and see what level of assets there are to support the residual level of spending after adjusting for those items kicking in. Look at a VPW table and see if the profile and potential variability in spending is acceptable. Also, what are the opportunities for PT semi-retirement work if necessary.
surfhb
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Re: Early retirement reality check

Post by surfhb »

rrppve wrote:
surfhb wrote:Reality check: Please break down where a couple in thier 50s with no debt spends 130Gs a year? Good God, man! You could have retired years ago if you kept your spending down
Seriously! Why?
Because he's a multi-millionaire and the reality is that its possible he will wind up penniless in his old age.

....Only on the BH forum :D
cherijoh
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Re: Early retirement reality check

Post by cherijoh »

golow2016 wrote:I am hoping to get some feedback on my planned early retirement. Here are some specifics regarding my numbers:

Brokerage accounts

SEP 1.1 M
Roth IRAs: 480 K
Regular non-tax advantaged: 1.3 M
Checking/business accounts: 140K

Home: about 700k

No debt.

We are both in our early 50s.

My wife and I have been tracking our expenses over the past year and a half. We are averaging about 130,000/year. We have not factored in a new car, major home repair, etc. as we have not experienced those costs in the past couple years. I am an independent contractor, so we have been paying healthcare expenses and other benefits normally received by employees.

I am hoping to retire in about two years. My job currently brings in about 150,000/year after taxes.

When I plug my numbers into fire Calc, it gives me about 85% chance of not running out of money by age 90. If I include Social Security, approximately 32,000 per year at age 70, the number goes up to 92% or slightly higher.

I am assuming that my Social security benefits Will be worth less by the time I am 70, either by higher taxes, lower benefit calculations, etc. So I am not very comfortable using the Social Security benefits in my calculations.

Our plan is to shoot for 4% withdrawal rate, With the understanding that we may need to adjust in the future.

Any comments/feedback would be most appreciated. ...
Does your $130K of annual expenses include taxes? FireCalc is based on what you withdraw from your accounts not what you get to spend. (That isn't always clear to its users who assume that taxes are covered in its calculations). Since you have considerable tax advantaged assets, you will owe significant taxes when you start dipping into those funds.

You definitely should include funding for irregular expenses like a car and major home repairs. I would consider the age of your current cars as well as the age of your roof and HVAC systems. When was the last time you had the house painted inside and out?

While I wouldn't as far to say that you have a spending problem, I do agree with surfhb that your spending level relative to your income is inconsistent with your desire to retire early. I think it would be a good exercise to see if there are ways to trim some of the spending without sacrificing and sock it away as an extra cushion. What would be a reduced spending level with which would be able to live comfortably? What withdrawal rate would that give you?

I personally wouldn't feel comfortable with your plan at this point based on your numbers. Your biggest risks IMO are from sequence of returns and inflation. The stock market has been on a long run without a sizeable correction and inflation has been pretty tame the last decade (with the notable exceptions of healthcare and college education).
randomguy
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Re: Early retirement reality check

Post by randomguy »

AlohaJoe wrote: Three other quick comments:

- Remember that the "4% rule" is based on a 65-year old couple. You're over a decade younger, so it isn't really an appropriate measure.
- Using firesim to look at things out to age 90 is fairly aggressive. You have about a 70% chance of living longer than that, unless you and your wife are both smokers or have some other kind of chronic medical condition. Try running it again with ages like 95 and 100 to see how it looks.
- You also mention you're not planning on retiring for around 2 more years. A lot can change over that period: you can cut your expenses, you can save a lot more money, the market can do extremely well.
-4% doesn't really change much with time. Feel free to use 3.7 if it makes you happier.
-70% is much higher than the numbers I have seen. https://personal.vanguard.com/us/insigh ... ement-tool for example gives 2 55 year olds a 43% chance of one of them making it. And of course when one spouse kicks the bucket expenses can drop (move to a one bedroom, 1 car versus, less health care, less food, clothes, and so on) but so does SS. You need to figure it out
- Yep


Retiring here isn't a no brainer where you can do whatever you want and never have to worry about money (i.e.the <2% SWR crowd). If you retire and the markets drop 50% over the first 3 years, you should be willing to cut spending by 10-20% for several years. With no flexibility this is iffy. With flexibility, you should be good to go.
cherijoh
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Re: Early retirement reality check

Post by cherijoh »

randomguy wrote:70% is much higher than the numbers I have seen. https://personal.vanguard.com/us/insigh ... ement-tool for example gives 2 55 year olds a 43% chance of one of them making it. And of course when one spouse kicks the bucket expenses can drop (move to a one bedroom, 1 car versus, less health care, less food, clothes, and so on) but so does SS. You need to figure it out
And don't forget that a widow/widower goes from MFJ to single tax filing status. At these spending levels a b ump up in marginal tax bracket is almost certain even with the loss of one spouse's SS.
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knpstr
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Re: Early retirement reality check

Post by knpstr »

golow2016 wrote:Any comments/feedback would be most appreciated. ...
I wouldn't worry about long-term bonds. Short-term bonds are fine. The bond component's purpose is to mitigate volatility and short-term bonds are the best at that. Right now you are 60/40 with 60 in equities and 40 in cash and cash equivalents. That is a conservative portfolio already, especially one planning to run for 40 years.
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Jack FFR1846
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Re: Early retirement reality check

Post by Jack FFR1846 »

I'd also be interested, just out of curiosity where a couple spends $130k a year.

I spend less than that in our HCOL area even paying $65k a year for DS1 private college and $8k DS2 private high school. I won't mention our 4 cars (DH, DW, DS and my mom's). Well, I guess I did.
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Sidney
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Re: Early retirement reality check

Post by Sidney »

rrppve wrote:Seriously! Why?
He has every right to spend his hard earned money any way he wants. Probably lives in a desireable HCOL. Insurance including health, home, auto, umbrella could be $25k alone at his level of wealth.
Exactly. Except to the extent that he may not be directly or indirectly (through the calculators) including taxes, non-recurring items, the breakdown of the spending is none of our business. I could easily construct scenarios where the spending would appear either reckless or quite benevolent.

The only question is whether the spend and the assets are consistent with early retirement.
I always wanted to be a procrastinator.
JW-Retired
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Re: Early retirement reality check

Post by JW-Retired »

golow2016 wrote:
SEP 1.1 M
Roth IRAs: 480 K
Regular non-tax advantaged: 1.3 M
Checking/business accounts: 140K

When I plug my numbers into fire Calc, it gives me about 85% chance of not running out of money by age 90. If I include Social Security, approximately 32,000 per year at age 70, the number goes up to 92% or slightly higher.

I am assuming that my Social security benefits Will be worth less by the time I am 70, either by higher taxes, lower benefit calculations, etc. So I am not very comfortable using the Social Security benefits in my calculations.

Our plan is to shoot for 4% withdrawal rate, With the understanding that we may need to adjust in the future.

Any comments/feedback would be most appreciated.
Just wanted to clarify something: that annual 4% withdrawal rate has to include all investment expenses, not just what you take out of the account to pay taxes on and spend. If you are doing very low cost investing per Boglehead practice this might mean the 4% is really only 3.9% income for you. If you have more typical industry standard high cost advisers and investments then it would mean just 2-something percent you could spend. Hopefully that isn't you?

As a sanity check using Vanguard's very simple & quick Monte Carlo investment calculator: a 4.1% drawdown (a Vanguard 4% for you) with a 60/40 equity/bond portfolio & 35 years, I get an 88% chance your portfolio will survive. Pretty close to firecalc. More conservative Bogleheads like me would like that to be 95% or more.

https://retirementplans.vanguard.com/VG ... ggCalc.jsf

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North
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Re: Early retirement reality check

Post by North »

How did you manage to accumulate a $4 million net worth while spending $130K of a $150K salary? Lottery? Big inheritance?
ubermax
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Re: Early retirement reality check

Post by ubermax »

I've attached a spreadsheet that can give you a general feel of how adequate your treasure chest is when you early retire and embark on what could be a 30-40+ year retirement ; I pre-filled it with some numbers that you can change to suit your own situation - for example , the investment return assumption is intended to be the weighted return of your portfolio which can be changed over time to reflect your current situation , I've assumed no Social Security (SS) for either you or your wife - you've said that you will start SS at age 70 and if you're handy with Excel or maybe have a family member who is , then the spreadsheet can be modified to first offset the budget at age 70 by SS and then take the balance from your portfolio - similarly if your wife will also be collecting , modifications can be made accordingly .

You can assume the initial retirement budget will increase with an assumed growth factor or let it be static ; I've set it up for simplicity to assume SS and any company pension will grow annually by the same factor but it looks like for you the company pension is your treasure chest .

The spreadsheet as it stands goes out 30 years tops which is probably close to your life expectancy but again it can be modified to go out more years ; it also overstates what you'll need for at least a couple of reasons : (1) It discounts future payments using interest only which implicitly assumes you'll live to each future age whereas in reality there's a chance you'll die before any particular future time point and (2) It ignores your future SS payments but like I said it can be modified to consider those .

Like I said it provides a rough feel of assets needed to support a particular income stream but given the existing inputs you can see that roughly 3 million is required at 54 to support a long retirement - there's 16 years at 130/year that you need to cover before getting help from SS .

Bottom line I think you're in great shape to retire early but I think you might need to monitor the situation as time goes by and be flexible enough to adapt if need be .


Spreadsheet !!!
rkhusky
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Re: Early retirement reality check

Post by rkhusky »

North wrote:How did you manage to accumulate a $4 million net worth while spending $130K of a $150K salary? Lottery? Big inheritance?
+1
KlangFool
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Re: Early retirement reality check

Post by KlangFool »

OP,

You should do a sanity check on your annual expense.

1) Look at your tax return and find out how much tax that you pay.

2) Look at your income for the year

3) Look at increase or decrease of your saving for the year

Take those 3 numbers and get an estimate of your annual expense.

Your annual expense of 130K per year does not look correct.

A) Your annual salary is only 150K and you pay tax on this. So, this does not cover the annual expense.

B) Your investment at taxable account generates some income.

Unless and until you get a better estimate of your annual expense, all forecasts are meaningless.

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AlohaJoe
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Re: Early retirement reality check

Post by AlohaJoe »

The $150,000 is after taxes.
randomguy
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Re: Early retirement reality check

Post by randomguy »

North wrote:How did you manage to accumulate a $4 million net worth while spending $130K of a $150K salary? Lottery? Big inheritance?

The take home pay is 150k not the salary. For all we know that is after say 100k of 401(k) contributions. Heck saving 12k/year for the last 30 years would give you 4 million if you had invested it in stocks. Granted 12k in 1980 was a lot of money:)
KlangFool
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Re: Early retirement reality check

Post by KlangFool »

AlohaJoe wrote:The $150,000 is after taxes.
Okay. Let's assume that 120K annual expense is correct, you need to pay tax on the income to cover the expense. So, how much income do you need for early retirement? That is the number that you need: annual expense + tax.

Your asset ~ 3 million

4% SWR = 120K. But, this is for normal retirement. Not for early retirement. At a rough estimate, this looks risky. You should lower your annual expense.

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LadyIJ
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Re: Early retirement reality check

Post by LadyIJ »

The figures do not equate to me either as others have noted (the amount of take home, expenditures and savings). Waiting to hear from OP.
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Pajamas
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Re: Early retirement reality check

Post by Pajamas »

My take is the same. Reading your post and looking at your assets had me thinking that you were set for life until I read that your annual expenditures are $130,000, excluding some inevitable major expenses, so realistically even higher than that.

It is very easy to spend that much a year but if you want to retire in your early 50s, a 4% withdrawal rate calculated when the markets have been going up for several years is risky.

The easiest ways to remedy that would be to save more and spend less and it's a matter of personal preference. You could work longer, continue to work at a reduced rate, cut expenses, liquidate unnecessary assets, etc.
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golow2016
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Re: Early retirement reality check

Post by golow2016 »

Thanks much for all the thoughts/feedback.

A little history/perspective regarding net worth and expenses:

I spent about 15 years in a very lucrative and high stress job. During that time period, after tax income was almost 4 times current, stress level about 20 times current, expenses about double current. Also had several years of well above index performance in the stock market. When that job fell apart, we cut our expenses by about 50% over the next 3-4 years.

I certainly see the big difference even 5-10% decrease in expenses makes. Going from 130 to 120k/ year changes the calculated outcomes dramatically.

Regarding taxes, I have realized nearly all capital gains in taxable account, paid taxes on Roth conversions, so will be looking at ordinary income rates on about 30% of the portfolio. At least that's how I see it.

Thanks again for all the great feedback, it's much appreciated. Keep it coming please!
xcel730
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Re: Early retirement reality check

Post by xcel730 »

Your average annual spending is $130,000 a year. However, don't forget that when you retire, you have a lot more time in your hands. You may travel more, have new hobbies, shop more, so depending on your and your wife's personality, you may need more.

Once you hit your 70-80s, chances are great that your desire to travel and explore will drastically reduce and your spending level will also reduce by a wide margin. I saw that from both my parents, my in laws, and their respective friends. When they first retired, some traveled 3-6 months out of the year, one got very into photography and purchased about $30,000 worth of camera gears in a few years, one got into high-end audio equipment, etc. However, 15 years later, they traveled maybe once or twice a year for about a week each time and for the rest of the time, they mostly stay local and just spend time with family (grandchildren) or friends.

Another thing to consider, perhaps you can "retire" by getting out of your stressful/high paying job and working either part time or doing something that doesn't pay well, but you actually enjoy? What about starting a small company with very little cost/overhead? Since you're pretty much financially independent, your new company could in theory generate only $30,000 a year and you'll be fine. Doing this will have the benefit of generating some income (relatively small), but more importantly, it'll keep you guys occupied so that you won't get bored and end up spending your hard earn money.
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BigFoot48
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Re: Early retirement reality check

Post by BigFoot48 »

golow2016 wrote: I am assuming that my Social security benefits Will be worth less by the time I am 70, either by higher taxes, lower benefit calculations, etc. So I am not very comfortable using the Social Security benefits in my calculations.

Our plan is to shoot for 4% withdrawal rate, With the understanding that we may need to adjust in the future.

Any comments/feedback would be most appreciated. ...
Plug your numbers into the Retiree Portfolio Model, with and without SS benefits, and see if your numbers work with plenty of cushion.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 18-time loser
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Bustoff
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Re: Early retirement reality check

Post by Bustoff »

golow2016 wrote: We are both in our early 50s.
We are averaging about 130,000/year.
I am hoping to retire in about two years.
Our plan is to shoot for 4% withdrawal rate,
Some experts are now suggesting early retirement may require a more conservative withdrawal rate, perhaps closer to 3%.
With your annual spending, that would require 4.3MM. That seems like a lot!
On the other hand, assuming zero real return, $130K X 30 years = $3.9 MM. So maybe $4MM is not out of line.

We retired early with a lot less but our annual spending is also much less.

* full disclosure: We follow the Taylor withdrawal method.
viewtopic.php?t=73249
ubermax
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Re: Early retirement reality check

Post by ubermax »

BigFoot48 wrote:Plug your numbers into the Retiree Portfolio Model, with and without SS benefits, and see if your numbers work with plenty of cushion.
Bigfoot48 , it appears that you have been working on your model and refining it for a few years now - I haven't studied it thoroughly but it's quite impressive , big file and it seems to incorporate many inputs that are relevant to retirees - kudos to you for this undertaking .

However , I think it's overkill for this OP's situation and for many current retirees who just want a rough idea of how their existing assets compare to the present value of future withdrawals given a few assumptions .

The OP has provided his age , assets , and an anticipated SS retirement age with associated benefit ; I've revised my earlier spreadsheet to reflect his projected SS benefit and here's a link to it https://www.dropbox.com/s/urbs7kvbv1rfy ... .xlsx?dl=0 - if his wife will also be collecting , then the spreadsheet can be further modified in a similar way ; and just to reiterate the present value amounts are overstated somewhat since a mortality assumption is absent .

There have been other efforts to construct retirement models over the years ; Bobcat2's post awhile ago mentioned one of these located here viewtopic.php?t=111355 and here is a link to that author's blog/website http://howmuchcaniaffordtospendinretire ... sheets.htm - in addition to the spreadsheets there is also some good information about projection techniques in general as they pertain to retirement income modeling .
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BigFoot48
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Re: Early retirement reality check

Post by BigFoot48 »

ubermax wrote:Bigfoot48 , it appears that you have been working on your model and refining it for a few years now - I haven't studied it thoroughly but it's quite impressive , big file and it seems to incorporate many inputs that are relevant to retirees - kudos to you for this undertaking .

However , I think it's overkill for this OP's situation and for many current retirees who just want a rough idea of how their existing assets compare to the present value of future withdrawals given a few assumptions .
Thanks Ubermax, and I agree my kitchen-sink model, which includes nearly every portfolio and financial event a retiree may face, is more than golow may need to answer his question. He may find your very nice model is all he needs, and can reserve mine for for more complex analysis.
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209south
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Re: Early retirement reality check

Post by 209south »

Jack FFR1846 wrote:I'd also be interested, just out of curiosity where a couple spends $130k a year.

I spend less than that in our HCOL area even paying $65k a year for DS1 private college and $8k DS2 private high school. I won't mention our 4 cars (DH, DW, DS and my mom's). Well, I guess I did.
So in a HCOL area you spend less than $55k (<$130 - $65 - $8 = ~$55k) on housing, property taxes, food, insurance, automotive, health care, hobbies, etc? Out of curiosity, what HCOL do you reside in? It would be hard to make those numbers work in the NYC suburbs - my property taxes alone are over $55k :(
staythecourse
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Re: Early retirement reality check

Post by staythecourse »

With 3 million liquid net worth and no debts with spending at 130k per year yes I think ER is doable, BUT...

Some changes need to be made in the above situation. The EASIEST or what I love to call the "low hanging fruit" is not to save more money, but figure out how to decrease spending. Could you move to a lower cost living area? Could you downsize and free up home equity?

Either way if one can't live on 3 million then there is a problem. Figure out where to cost 24k/ year which is just 2k/ month. That will go a LONG way to helping you make this work. Or maybe just find a part time job for 24k after taxes?

Good luck.
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carolinaman
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Re: Early retirement reality check

Post by carolinaman »

It seems like you have 3 options:
1-retire as planned, monitor plan annually and adjust withdrawal/budget as needed to assure high probability of money lasting.
2-reduce expenses to assure higher probability of success. A modest adjustment of 5 to 10% can make a big difference. Note: you should still monitor plan annually but adjustments may not be as critical.
3-work longer. Working a couple more years increases your assets and that is 2 less years living off of your assets.

Annual expenditures of $130k does not seem unreasonable to me. If that is what OP is accustomed to, why cut your budget sacrificially and pinch pennies during your retirement years if you do not have to? That said, you should probably do more analysis of your budget needs during retirement. Some expenses go away (FICA, savings, work related expenses, etc.) while you may incur others that you currently do not have (more travel, hobbies, leisure activities). I would strive to have a realistic but comfortable budget for your needs. I would not let the reaction of some respondents deter you from doing what you think makes the most sense.
Jack FFR1846
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Re: Early retirement reality check

Post by Jack FFR1846 »

209south wrote:
Jack FFR1846 wrote:I'd also be interested, just out of curiosity where a couple spends $130k a year.

I spend less than that in our HCOL area even paying $65k a year for DS1 private college and $8k DS2 private high school. I won't mention our 4 cars (DH, DW, DS and my mom's). Well, I guess I did.
So in a HCOL area you spend less than $55k (<$130 - $65 - $8 = ~$55k) on housing, property taxes, food, insurance, automotive, health care, hobbies, etc? Out of curiosity, what HCOL do you reside in? It would be hard to make those numbers work in the NYC suburbs - my property taxes alone are over $55k :(
Suburbs of Boston (just outside 495).....and yes. Mortgage was paid off 15 years ago, my hobbies tend to make me money, not cost money, prop tax is reduced because I forest manage which reduces the forest value to 10% for tax purposes, cars were all bought cash and are cheap to insure. Health care is somewhat expensive, but hitting the out-of-pocket-max has made our last 6 months zero cost.
Bogle: Smart Beta is stupid
mw1739
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Re: Early retirement reality check

Post by mw1739 »

You have 20% of your $3MM in cash, or about $600,000. This is approximately 4 years of expenses, which seems like way to much. Cut that back to 1 year of expenses and invest the rest in short-term bonds or high-yield CD's. Even at 1%, that would be about $5,000 a year in extra income.
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HomerJ
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Re: Early retirement reality check

Post by HomerJ »

Pajamas wrote:Reading your post and looking at your assets had me thinking that you were set for life until I read that your annual expenditures are $130,000, excluding some inevitable major expenses, so realistically even higher than that.
Yep, me too... I thought the OP was set with a paid off house and a huge portfolio.

Then I saw the $130,000 expenses. Either cut expenses or work longer and save more.
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HomerJ
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Re: Early retirement reality check

Post by HomerJ »

209south wrote:It would be hard to make those numbers work in the NYC suburbs - my property taxes alone are over $55k :(
You need $1.4 million in investments just to cover $55k of property taxes in retirement.

I would suggest moving when you retire.
randomguy
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Re: Early retirement reality check

Post by randomguy »

209south wrote:
Jack FFR1846 wrote:I'd also be interested, just out of curiosity where a couple spends $130k a year.

I spend less than that in our HCOL area even paying $65k a year for DS1 private college and $8k DS2 private high school. I won't mention our 4 cars (DH, DW, DS and my mom's). Well, I guess I did.
So in a HCOL area you spend less than $55k (<$130 - $65 - $8 = ~$55k) on housing, property taxes, food, insurance, automotive, health care, hobbies, etc? Out of curiosity, what HCOL do you reside in? It would be hard to make those numbers work in the NYC suburbs - my property taxes alone are over $55k :(

HCOL vary considerably. Things like NYC and SFO/silicon valley are in a different level than say most of NJ, washington DC and some parts of southern CA. The difference between having to spend say 1.2 million for a 1500 sq ft house and 500k is huge from a budgeting point of view. Both might be HCOL from the people living in 200k houses but the amount of money you need to live in both is vastly different. And things 4 cars can very from say 5k (4 honda civics) to 80k+ (4 luxury SUVs) per year in cost:)
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